Trading Religion: Profits are mine, the Losses You Cover

By Ahmad Nadeem Gehla

Starting a new business is all about possibilities, optimism, hard work and risk of losses. However owning a business in any famous markets of Pakistan is considered as a guarantee for success because of high volume of ready customers. High returns on investment push high the property prices and rentals, only real wealthy can afford to do business in these markets. The powerful ‘traders unions’ of these wealthy business owners safeguard them from tax authorities and make them immune to laws and business regulations. A comprehensive package of insurance essential for businesses in any civilized society also remains absent as business owner are not willing to spare a small percentage of their profits for insurance costs.

The traders have been biggest beneficiaries of hypocritical use of religion as an excuse to avoid legal, social and corporate responsibilities. Pakistan is the only country in world where trading is grossly under taxed, uninsured and completely unregulated. Even if state machinery, which itself is extremely corrupt and weak, desires to implement the business regulation, finds itself at war against religion. Smuggling, tax evasion and refusal to buy insurance are justified under religious reasons and backed by edicts of mullah who encourage ‘charity’ for Madrassah and declare state taxes and insurance as un Islamic. The wealthy traders prefer to pay little in charity to comply with religious edict rather than paying for insurance costs of huge businesses and properties.

In absence of insurance, a trend has developed in business community to ask compensation from government for damages in case cases of fire, riots, accidents and natural disasters. At the same time the state cannot force traders to buy insurance cover for their businesses against their so called religious beliefs. Property insurance can covers damage to the building that houses business, as well to as items inside, such as furniture and inventory. If the business owners choose to keep their properties uncovered because of religious reasons and to save money, they voluntarily choose to bear the losses. Any losses which they have to bear in case of damage to property must be considered as a sacrifice for their religious beliefs and pleasure of Allah – not a big price to earn haven.

Pakistan is currently facing the worst internal unrest of its history, suicide blasts and terrorism has resulted in to loss of innocent lives and destruction of public properties. The religious extremism which was nourished by state institutions has resulted in to frequent riots and burning of private properties. The nations face such challenges with resilience and change their attitudes. This has not changed the mind set of people and especially the business community in Pakistan. After every act of terrorism; they look towards government for compensation. Although destruction of their properties by terrorists and religious fanatics is condemnable, they themselves choose to keep themselves exposed to risk despite having resources.

The tax payer’s money is meant to provide healthcare, education and infrastructure for people, not to compensate rich business and property owners who avoid their corporate responsibilities by following profitable religious ideologies. In aftermath of Karachi fire, a hefty amount of Rs.30 billion is being demanded as compensation from government by these wealthy traders. This amount is almost equal to the annual education budget of the country and half of the annual budget of Baluchistan province. The traders association is estimating each burned shop to averages around 5-6 million with inventory of same amount. In a country where 60% live on less than two dollars a day, those who on average own 10-12 million worth businesses are not willing to insure their properties.

On taxation side, the situation is more hopeless in trading community of Pakistan. Assuming a 25% annual return on investment from a 10-12 million business would mean 2-3 million of taxable profits. This would mean each trader expecting the compensation would have been each contributing over million rupees annually to government exchequer beside sales and wealth taxes. Has that been the case, Pakistan would have been one of the richest country in region and people would have no objection even if the wealthy traders were compensated from tax payer’s money. The situation remains quite opposite, whenever a tax officer dares to visit these business markets, the traders thrash and detain them in shops.

The employees of these traders face the worst kind of work place exploitation because of extended working hours, lack of social security and employee’s benefits. Majority of them are daily wages employees even after working for decades and even not registered with labour department to have job security, in incidents of terrorism, they lose the means of living. There are also those who own small stalls and makeshift shops in big business markets which are the only asset to support their families. In incidents of terrorism, they lose everything. The compensations announced by government officials remain limited to wealthy business owners ignoring the small traders and workers. Even deeply saddened by their losses, the compensations being asked cannot be justified.

Malaysia is also a developing Muslim majority state which has made insurance compulsory for businesses and transport of all kinds; that does not hurt Islam or Muslim faith. The mix of religion and business as everything else mixed with religion from laws to politics has turned Pakistan in to a state which is fast becoming ungovernable. The terrorism and extremism would not vanish overnight and will result in further destruction of private properties. After every such incident announcing compensation from tax payer’s money is not only impossible but will result in to a halt in development sector and unemployment. Although those really affected and deserving does not get any support, the powerful traders unions help tax evaders and lawless to get paid for their crimes.

The government compensation have to be directed to the under privileged small business owners and workers of terrorism affected places rather than wealthy traders. If someone desires to own a business or property, it has to be regulated by laws of land, not by person’s religious beliefs. Those who wish to own business, property or car, should spend a friction on costs of insurance. Those who believe insurance cover against their beliefs should sacrifice their belongings for their beliefs and not ask government to pay the price of their beliefs from tax payer’s money. No one can force them to own property and insure it but at the same time public is not supposed to finance their beliefs in cases of terrorism or natural disasters.

6 Comments

Filed under Economy, Justice, Multinational Corporations, Pakistan, Society, state

6 responses to “Trading Religion: Profits are mine, the Losses You Cover

  1. Pingback: Tradings and Religion « Peg With Gehla

  2. chacha

    almost evryone among these traders is claiming the loss of crores of rupees…..yea it is possible…but did any of them declared his WEALTH in income tax returs…even 10% of their claimed loss……the best way to assess their loss must be according to their declared wealth…stock in trade….any compensation over and above this amount should be rejected……this method will compel them to get their valuables insured…they will learn how to fing Insurance….allowable in Islam…..some ayat..or hadees will do wonders…..

  3. Milind Kher

    The above article illustrates why it is necessary to have a secular law. You have the full power to frame it, and no crooked mullahs can exploit it.

  4. Good article but I would like to add that government has to be a little bit more delicate in handling this situation. If they went outright and said something to the effect that we won’t compensate you because its your religious beliefs that made you suffer these losses then the mullahs will jump on this and cause more harm to this already suffering country. A reasonable compromise would be for the government to declare that they will compensate according to their last declared tax returns. Problem solved!

  5. hoss

    I think the author and some posters here are showing lack of knowledge of business affairs.

    First, the inventory or stock, or furniture and equipment are not shown on the tax returns. The value of the furniture and equipment etc would be the depreciation value on the date of the tax filing day and not the whole year. For wholesale businesses, like the ones burned down in Karachi, their inventory might not have any relation with their yearly income. So the tax returns are not the correct barometer to gauge the losses the businesses suffered.

    The author is completely oblivious of the fact that most of the whole sale businesses borrow money from the banks on their inventory and I am sure the traders in Karachi too owed monies to the banks. So it would not be difficult at all to find out the accurate or close to accurate value of the inventory.

    All banks irrespective of their clients’ religious beliefs require insurance of the inventory traders are borrowing against. As long as the traders in Karachi borrowed money from the banks against their inventories, they are covered by regular insurance. If a borrower does not buy insurance himself, the bank buys that for him charging the customer’s account. Banks usually have an 80/20 margin. That means they will only lend 80% of the total value and the borrower is supposed to present inventory reports every month covering the monies borrowed.

    I don’t know what banks demand should be covered by insurance but in some areas banks require coverage for catastrophic events. Fire is a mandatory coverage but insurance in this case would be governed by catastrophic event as the cause of the fire is rioting and deliberate arson by the mob and not some commonly acceptable reason.

    Traders and shopkeepers all over the world are religious freaks more so in our part of the world. The famous influence of Bazaars on the Iranian 1979 uprising against the Shah and the continued Bazaar influence over the mullah regime is well known. Pretty much all religion oriented political parties are funded by the Bazaar in Pakistan too.

  6. AZW

    Hoss:

    You are correct that businesses are taxed on their net income, yet is there no provision of showing the balance sheet for showing depreciation expenditures, and for showing other items on the balance sheet that feed into the income statement.

    If this is the case, then Asif’s suggestion makes a lot of sense.

    But I speak from a layman’s persective. I believe the resident Corporate Attorney, none other than Mr. YLH will be a handy source here for this topic.